5 factors impacting the currency exchange rate

If you plan to travel abroad, you need to prepare several things. Finance forms the most prominent part of it. International borders make it tricky to deal with physical funds. They also impact fund transfers. This is because currency conversion takes place before sending money overseas. If you want to estimate the transfer cost, you want to check the impact of the exchange rate. This task seems complicated when done manually.

Hence, you get an online currency converter. You may use it to convert GBP to INR or any other currency. The tool takes in the two currencies and uses the exchange rate to derive the result. Since the exchange rate plays an essential role in influencing the conversion, it is necessary to track it. However, it keeps fluctuating frequently depending on the economic forces. Knowing the factors responsible for this is helpful:


It pertains to purchasing power in an economy. Different countries have varied economic conditions; they deal with specific price results. This impacts the exchange rate significantly. For instance, buying a product in one country may cost more than in others. The currency value leads to this variation in purchasing power. As a result, inflation impacts the exchange rate upon conversion of SGD to INR.

Government regulations

The law governs the movement of goods and currency overseas. Adjusting interest rates, buying foreign currency, influencing local lending rates, etc., are some actions taken for the same. This also involves manipulating the currency exchange rates. The reform happens on a global level. Hence, macroeconomic factors play a huge role in this. Checking updates for the same is helpful before converting the Pound to Rupee.

Interest rates

Lenders enjoy higher lending power when a country offers a lucrative interest rate. It also attracts foreign capital investment from other countries. As a result, the exchange rate rises and makes the currency stronger. The opposite happens when the interest rates are lower. Hence, the gains on investments directly influence the currency exchange rate. Banks and currency exchange offices consider this when converting Pound to INR.


Deficits are closely related to the balance of trade. Here, a country’s trading condition gets compared to its trading partners. If its currency account deficit balance is higher than other countries, its currency weakens in value. On the other hand, a higher value impacts currency value positively. This factor gets considered for converting 1 GBP to INR.


Changes in commodity prices and trade activities also influence exchange rates. The speculators’ sentiments have a bearing on the same. Their confidence or the lack thereof in the currency value is the motivation. If they perceive the market as favourable, the currency gets overvalued and vice versa. This impacts the exchange rate while converting USD to INR.

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